CEPS and EPRA NAVPS CAGR of 7% and 12% ‘20-‘22e

Net letting of SEK 13m (18m) in Q3

‘21e P/CE of 9x vs. sector average of 18x

Recurring PTP back to growth in Q3 and positive outlook
In Q2, CEPS fell by -11% y-o-y, with decline mainly to granted discounts. The company reported fewer discounts in Q3, and CEPS grew by 7% y-o-y (ABGSCe +4%). For Q4, the company is guiding for normal rent collection levels and a negligible amount of granted discounts. Net letting in Q3 reached SEK 13m (18m), or SEK 53m (32m) on a T12m basis, which indicates continued growth. The net letting figure is strong in relation to peers, which have reported negative (Castellum, Fabege, Atrium Ljungberg, Platzer) or slightly positive (Kungsleden, Wihlborgs, FastPartner) figures. We have made minor forecast revisions after the report, and expect CEPS to grow by 2% and 11% in ’20e and ’21e.

Forecast EPRA NAV growth of 8% & 14% in ‘20e & ‘21e
In Q3, Diös reported EPRA NAV of SEK 76 (vs. ABGSCe 74), up 9% y-o-y, adj. for DPS. Diös reported value revisions of 0.04% in Q3 driven by small adjustments of NOI and yield assumptions. Due to the uncertainty surrounding retail values, we pencil in value revisions of -0.6% for ‘20e. However, we note that Diös developed and signed a lease of 3,800 sqm with Tele2 for the conversion of existing retail premises to offices. This highlights the company’s conversion ability, in our view. We expect a CEPS contribution to EPRA NAV of ~10% annually, which takes EPRA NAVPS to SEK 77 and SEK 85 in ’20e and ’21e, respectively, representing a CAGR of ~11% (adj. for DPS). The strong cash earnings contribution to EPRA NAV allows values to fall ~4.5% in N12m before ‘20e EPRA NAV (adj. for DPS) declines.

Equity market implicitly expects property values to fall 6%
Diös’ book value per sqm stands at 23,300SEK/sqm. However, the P/EPRA NAVPS of 85% implies an implicit value per sqm of 21,800 SEK sqm, or a fall of 6%. We think the NIY of 5.8% (adj. for projects) and the ca
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